Archives for February 2016

We receive annual, bi-annual and quarterly dividends from our ETF and Share portfolios. We try to ensure that dividends are received every month based on the payment dates for the ETFs and shares. Monthly updates of the dividend income received can be found here.

The aim is for the 2016 dividend income received to reach S$5,000 by the last update of the year.

We receive bi-annual and monthly interest from our bond holdings and cash in savings accounts. We try to invest in Singapore corporate bonds for a higher return instead of the Singapore Savings Bonds (SSBs). We also look to maximise the interest rate on our cash holdings in Singapore and Australia. I should post information on our bonds, wholesale life policies and investment cash holdings separately. For now, I shall call it the Other Portfolio and you can find a snapshot here. Monthly updates of the interest income received from this Other Portfolio and the rest of our cash holdings can be found here.

The aim is for the value of the Other Portfolio to reach S$150,000 by 31 Dec 2016.

The other aim is for the 2016 interest income received to reach S$5,000 by 31 Dec 2016.

This will mean that the goal is for the 2016 passive income received to reach S$10,000 by the last update of the year. Again, given the 10 year timeframe for this journey to Financial Independence, it’s important to have numerical goals every year to track our progress on our passive income received.

Our Share portfolio consists mainly of Singapore and some Australia stocks with a focus on dividend paying stocks. As mentioned in my previous post, the size of our Share portfolio is larger than the ETF portfolio as we had only recently started building up the ETF portfolio. That being said, the aim is to increase the size of the ETF portfolio until it is about the same size as the Share portfolio. Since we have decided on a bigger focus on ETF investing for our portfolio, I would think the size of the ETF portfolio should eventually outgrow that of the Share portfolio over the long term.

I have opted not to disclose the individual stocks that we own but the industries they are in as well as the investment amounts and percentages. A snapshot of our Share portfolio can be found here.

I will try to provide end of month updates on our Share portfolio as to the transactions we have undertaken for the month. We plan to mainly average down on our current stock holdings and possibly expand the number of stock holdings. It’s already taking up quite a bit of time to monitor the performance of each of our stock holdings and increasing the number would put us at risk of losing track of their performance. The growth of the Share portfolio should be slower than that of the ETF portfolio and this is in line with our strategy to have a bigger focus on ETF investing.

The aim is for the market value of the Share portfolio to reach S$120,000 by 31 Dec 2016. Given the 10 year timeframe for this journey to Financial Independence, it’s important to have numerical goals every year to track our progress on our total portfolio.

The way we have constructed our ETF portfolio is such that we should have exposure to local equities, local bonds and international equities. In theory, a portfolio of 100% equities should provide the best returns for a couple of our age over the long-term. In practice, the volatility of the 100% equities portfolio can be a real test of your risk appetite. Turtle Investor has written a good post about how the ABF Singapore Bond Index Fund can act as a safe harbour during volatile times and I recommend it for an understanding of why we have it in our portfolio.

Our ETF portfolio is smaller than our share portfolio but we intend to build it up until both portfolios are about the same size. The idea is that the ETF portfolio has a lower dividend yield & volatility but the share portfolio has a higher dividend yield & volatility. A snapshot of our ETF portfolio can be found here.

I will try to provide end of month updates on our ETF portfolio as to the transactions we have undertaken for the month. Generally, we invest more in months where the markets are doing badly and less in months whether the markets are doing well. The aim is for the market value of the ETF portfolio to reach S$40,000 by 31 Dec 2016. I will be interested to see how our performance would be by the last update of the year.

I thought about re-writing my posts but decided against it. Might as well summarise the content I have been covering so far and go forward from here. It’s more fun that way! Exchange-Traded Funds (ETFs) have started to form a significant part of our investment portfolio. MoneySense has a good article on ETFs and I recommend it as an introduction to what they are. Basically, ETFs are open-ended investment funds listed and traded on a stock exchange, which track or replicate a specific index such as a stock index. Since ETFs are passively managed, their fees are usually lower than those of actively managed investment funds.

The first three ETFs are listed on the Singapore Stock Exchange (SGX) and the next eight ETFs are listed on the London Stock Exchange (LSE). The links provide information on the details and holdings of each ETF. The trading and dividend currencies of these ETFs are SGD, USD, EUR and GBP, which is a currency diversification strategy we use to reduce the foreign exchange risk of our portfolio. The holdings in some of the ETFs overlap but they largely cover the major equity markets – US, Europe (including UK), Emerging Markets and Developed Asia Pacific (including Japan). This is a global diversification strategy we use to reduce the concentration risk of our portfolio.

This is my second time writing this post. My first self-hosted blog (also The Finance Smith) on WordPress is no longer active. To be honest, I’m still not sure what I did that caused the WordPress blog to be deleted. All I remembered doing was updating the template and the next thing I know – I had to reactivate my WordPress login details and my blog was gone!

Since it was a relatively new blog, I did not have that many posts on it (still, it was hours of writing!). But I didn’t back up the content so I lost all those posts. Needless to say, that experience was enough to make me try Blogger. Besides, I realised I liked writing and creating content but wasn’t so keen on managing my own self-hosted blog. I reckon Blogger should do fine for now. Let’s see whether this blog gets deleted in a month’s time. I can’t keep re-starting my journey every month on a different blog!

The About page should have information on what this blog is about and you can have a look to see what type of content you can expect to find. This post is about my background and why I started this blog. Since this is my second time writing this post, I just realised that I can refer to myself as Mr Smith and my wife as Mrs Smith. Just something interesting I thought of before having to re-introduce myself.

My wife and I met in university while studying in Melbourne. We graduated in 2009 and worked in Melbourne from 2010 – 2011 before heading to Sydney for work from 2012 – 2013. We moved back to Singapore in 2014 and have been here ever since. We learnt basic personal finance and investment skills from living together overseas since graduating and this is probably something I will mention more in future posts.

Having worked for a number of years, I started to wonder if it is possible to work because I want to and not because I have to. When we were living in Australia, we worked to get salary income that pays for our rent, utilities, groceries, entertainment etc. A portion of our salary income was designated as savings and another portion designated as investments. We were so caught up with building our life in Australia that we never really focused on increasing our investments.

After our return to Singapore to get married in 2014, we started to focus much more on our personal finance and investment skills. The idea that we should not rely on our jobs as our only source of income became a goal. Hence, the aim of this blog is for me to document our journey as a couple (two working professionals) towards Financial Independence. I will write about our personal finance and investment decisions and their impact on our net worth. To hold ourselves accountable, I will try to post actual and percentage figures of our assets, liabilities, income and expenses i.e. net worth.

As with any goal, the timeframe will shape the path I take. 10 years. That’s how much time I have given us to achieve Financial Independence. By 23 February 2026, we should be in a position to work because we want to and not because we have to. This means that we should have sufficient monthly dividend and interest income to cover our monthly expenses (both discretionary and non-discretionary) without any salary income. For the second time on my blog with the same name, let’s begin on this journey!=)